Starting from Scratch
One of the things I’ve learned over the years is that there is a persistent dualism in conducting research balance—a between reliable preexisting findings and questioning preconceived notions.
Read MoreInvesting Outside the U.S. - Purgatory for Pessimists
Anyone overweight to non-U.S. allocations has suffered over the previous ten years. The current equity bull market has not been kind to non-U.S. allocations. At a recent conference I attended, the term ‘TINA: there is no alternative’ came up more than once in the context of allocating investor portfolios. It captures the collective sentiment that equities, despite a massive bull run and rising valuations, are one of few viable asset classes to park capital.
Read MoreA Returns-based Approach: Incorporating Microcap in Equity Allocations
We are often asked how much should be allocated to microcap equities. As long-term investors that view the opportunity set through the lens of factors, our answer is usually some version of "probably more than you currently do." There is little empirical research specific to the intricacies of microcaps, and common benchmarks cast a shadow on the alpha that is readily apparent in active manager returns and factor spreads. This post attempts to provide an alternative framework for approaching and sizing strategic allocations to microcaps.
Read MoreMicro Caps, Factor Spreads, Structural Biases, and the Institutional Imperative
The final installment in this micro cap series touches on the massive factor spreads available in the micro cap space, structural biases that keep large investors out, and an argument for the persistence of factor returns.
Read MoreThe curious world of micro caps—leveling the playing field
Investing in micro caps poses a challenge for stock pickers. There's lots of noise in the data and, as we saw in the previous post, investing in micro caps requires expertise in many different types of investment situations—venture, growth, distressed, etc. This post attempts to cut through some of the noise inherent in micro caps to level the playing field.
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